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BNDES and Finep signs R$ 1 bn agreement to finance innovation in the sugar and ethanol sector

03/21/2011

The Brazilian Development Bank (BNDES) and the Research and Projects Financier (Finep) signed a Technical Cooperation Agreement to carry out the Joint Plan for Supporting Industrial Technological Innovation in the Sugar-based Energy and Chemical Sectors (PAISS).

The new program, a result of the joint initiative of the BNDES and Finep, will receive R$ 1 billion for the 2011-2014 period. Its purpose is to foment projects that aim to develop, produce and commercialize new industrial technologies designed for processing sugarcane biomass.

The projects arising from the selected business plans will be supported by either or both of the institutions, based on the existing financing lines, programs and funds. That is, investors may obtain financing from the BNDES’ and Finep’s several lines and programs, in accordance with project characteristics, including equity interest through BNDESPAR. The cost to the borrower, therefore, will depend on the model of the project presented.

This is a Brazilian government initiative aimed at uniting the efforts of its main foment organs, so that the country may reach and play, in more advanced technologies, the same role already completed in conventional biofuel production. The agreement between the two institutions, as a result, will contribute to better capacity-building of coordination to support investments in innovation in the sugarcane processing industry.

The BNDES and Finep have their own schedules for supporting the sector’s technological development. Hence, it is of the utmost importance to perfect this model to enable resources to be applied in a coordinated way, avoiding the repetition of efforts and the pulverization of resources.

Brazil is in a privileged position in the world as a large biofuel producer, particularly sugarcane ethanol, but current industrial technology is reaching its limit. The new challenge is related to mastering technologies to produce second-generation ethanol, that is, from biomass.

These new paths, however, constitute an intense international technological race, especially between the United States and the European Union, which may cause Brazil to lose its technological leadership in the sugar-based energy sector.

The technical areas of the BNDES and Finep have dedicated themselves to analyzing Brazil’s position in the development of new biomass conversion technologies. A study on the matter was published in the article the technological race for second-generation biofuels: a comparative perspective, in edition #32 of the BNDES Setorial magazine, available on the Bank’s website.

Due to this scenario and in order to reach its proposed objectives, the new program will have three main lines: second generation Bioethanol; new sugarcane products, including the development from sugarcane’s biomass through biotechnological processes; and gasification, with an emphasis on technologies, equipment, processes and catalysers.

The agreement between the BNDES and Finep to create the PAISS also aims to stimulate obtaining products with more added value, which may be obtained from sugarcane biomass, such as fuels with more energy content (diesel, gasoline, aviation kerosene) or even chemical intermediates with diverse industrial applications.

Brazil, unlike countries in the northern hemisphere, has competitive advantages due to its larger biomass availability at lower prices.This, added to more efficient support for the development of new conversion techniques, could lead the country to becoming the pioneer in cellulose-ethanol production and the production of other advanced biofuels.

To be eligible for PAISS, the corporate purpose of companies should be performing research, technological development and innovation activities related to the technologies included in the Plan. Proposals should be linked to the company’s business plan, foreseeing the actual introduction of the technologies and their respective products in the market.

The joint portfolio of innovation projects in the ethanol and derivates production chain of the BNDES and Finep totals R$ 413.5 million, of which the BNDES is responsible for R$ 169.1 million, through financing, and Finep for R$ 244.4 million. With this, the approval of the PAISS more than doubles the number of resources available to the sector up to now. The initiative takes Brazil closer to the level of investment in innovation of the United States and the European Union.

The PAISS does not involve resource transfers between the BNDES and Finep. The business plan selection process and full description of the PAISS will be available on the websites of both institutions (www.bndes.gov.br and www.finep.gov.br).

The PAISS page, on the BNDES website, can be accessed on the following link:
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